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Vietnam and EU signed a free trade agreement

After signing EVFTA and IPA, the two sides still have a lot of work to do to get these agreements approved and enforced.

Differences of the EU-Vietnam Trade Agreement

In the afternoon of June 30, in Hanoi, the Trade Agreement between Vietnam and the EU including the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) has been signed after 9 years of negotiations.

The signing ceremony took place under the witness of Vietnamese Prime Minister Nguyen Xuan Phuc and Cecilia Malmstrom – Trade Commissioner of the European Union.

EVFTA and IPA were officially signed

At the signing ceremony, Prime Minister Nguyen Xuan Phuc reiterated the meeting on the sidelines of the G20 with the President of the European Commission and the EU representative emphasized June 30 as the day of the historic significance of Vietnam – EU relations. “The agreement opens a new horizon for the development of both sides,” the Prime Minister said.

The head of the Vietnamese Government thanked  EU partners. He said that the EU with the East vision has considered Vietnam a partner, a potential country and a leading partner in Southeast Asia. “These two important agreements are like two large-scale, modern highways connecting closer to the EU and Vietnam, so that the two sides can access each other’s markets,” he said.

He also committed Vietnam to work closely with the EU to ratify these agreements soon.

Mrs. Cecilia Malmstrom – Trade Commissioner of the European Union mentioned the Vietnamese saying “When you eat a fruit, think of the man who planted the tree” to thank the preparation of partners and colleagues in Vietnam for 9 years. “Very soon Vietnamese consumers will have access to goods from Europe and vice versa,” she said.

The EU Trade Commissioner emphasized that EVFTA will eliminate 99% of Vietnam’s tariff lines to the EU and the remaining 1% will be removed through tariff quotas. This will eliminate the bureaucracy that businesses, especially small and medium enterprises, face.

She also welcomed Viet Nam’s opening of the shopping markets, so that Vietnamese companies could buy competitive equipment and services. “EU investment in Vietnam will grow dramatically thanks to these agreements,” Mrs. Cecilia said.

EU Trade Commissioner hopes that both parties will soon approve of  the implementation of the agreements, benefiting businesses and consumers. “This is the signal sent to the world that the protection trend is increasing in many places. The EU is targeting Asian friends, and Vietnam is the economic pillar in ASEAN, so this agreement is the foundation brick and an important platform in the activities of all parties”, Cecilia stressed.

Mr. Tran Tuan Anh – Minister of Industry and Trade further shared, the signing of EVFTA and IPA was only the first step and the two sides still had much work to do to get these agreements approved and effective.

As the host of IPA negotiation, Mr. Nguyen Chi Dung – Minister of Planning and Investment said, IPA with more comprehensive and balanced commitments on investment protection would contribute to strengthening the confidence of EU investors on the attraction, safety, friendliness and higher competition of the business investment environment in Vietnam, and vice versa. However, Vietnam is also facing some challenges in infrastructure system, and technology level,etc. in the process of implementing this agreement.

In order to put this agreement in practice, the Government is directing to review and propose to the National Assembly to amend or promulgate some important laws such as the Investment Law, Enterprise Law and Investment Law by public partnerships. Investment, Land Law, Construction Law, Law on Environmental Protection, Labor Code and some Tax Laws,etc.

These amendments are intended to further simplify and facilitate market entrance and implementation of investment and business activities of people and businesses, including FDI enterprises. The Government will also complete mechanisms and policies to attract private sector to invest in the construction of infrastructure projects and provide public services, open up capital sources for development investment.

Representatives of the Government of Vietnam and the European Union took photos at the signing ceremony on June 30

EVFTA includes 17 Chapters, 2 Protocols and a number of accompanying memorandum of understanding on trade in goods, services, investment, trade defense, competition, state-owned enterprises, government procurement, and departments intellectual property,etc. Textiles, footwear, furniture, agricultural products are the most benefited sectors from this agreement.

Regarding tariffs, as soon as the Agreement on EVFTA comes into effect, the EU will abolish import duties for nearly 86% of tariff lines and more than 99% of tariff lines will be removed after 7 years.

On the contrary, Vietnam also pledged to abolish 48.5% of tariff lines for EU goods. After 7 years, the number of tariff lines to be eliminated increased to 91.8% and after 10 years the tariff elimination rate was about 98.3% of the tariff lines. Vietnamese consumers will have the opportunity to consume the products of Europe at competitive prices.

The IPA Agreement includes modern regulations on investment protection that allow enforcement and implementation through a new court system for investment, while ensuring that governments on both sides have the right to regulate benefits of citizens.

The IPA Agreement will replace the bilateral investment agreements that 21 EU member states have signed with Vietnam, implementing a new legal framework to ensure the prevention of conflicts of interest and enhance transparency.